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Indian Economy on the eve of Independence | Class 12 Indian Economic Development Notes

The transformation of the Indian economy under British rule was drastic and had far-reaching consequences. This chapter aims to provide a comprehensive analysis of the economic landscape, delving into various sectors including agriculture, industry, trade, and infrastructure. For a holistic understanding, this chapter will enrich the existing notes with latest trivia, cross-disciplinary connections, and tools for further learning.

Short Notes and Summary

Indian Economy Before British Rule: A Self-Sustaining Landscape


Prior to British colonization, India boasted a robust and self-sustaining economy. Agriculture served as the backbone, providing livelihoods for the majority of the population. Moreover, India was renowned for its diverse manufacturing sectors, including handicrafts, textiles, metals, and precious stone works. Indian exports, particularly the world-famous 'Daccai Muslin' cloth from Dhaka, Bangladesh, were highly sought after due to their exceptional quality and craftsmanship.


Impact of British Rule on India's Economy: Colonial Interests Over Indian Development


The British ruled India for two centuries, fundamentally altering its economic fabric. Their policies transformed India from a producer of high-quality finished goods to a mere supplier of raw materials for British industries. Prominent thinkers like Dadabhai Naoroji, William Digby, and R.C Desai estimate that India’s aggregate economic output was reduced to less than 2%, with capital output below 0.5%.


Post-Independence Economic Challenges


After gaining independence, India faced a fragile economic situation. In response, the Indian government established the Planning Commission and initiated five-year plans to guide the nation's development.


Agriculture Under British Rule: Stagnation and Exploitation


Around 85% of India's population relied on agriculture for their livelihood. Despite an increase in agricultural area, productivity stagnated. Various factors contributed to low productivity and stagnation, including unfair land settlement systems like Zamindari, low technological adoption, and minimal use of fertilizers.


Industrial Sector: Systematic Deindustrialization


The British colonial government purposefully de-industrialized India with a twofold aim: to make India a raw material exporter for British industries and to turn it into a market for British goods. As a result, India's industrial base remained underdeveloped, leading to widespread unemployment.


Foreign Trade and British Monopoly


The British enacted restrictive trade and production policies that skewed India's foreign trade structure. More than half of India's trade was monopolized by Britain, exacerbated by the opening of the Suez Canal. Consequently, India became a net exporter of primary products and an importer of finished goods.


Demographic Landscape Under British Rule

The first census in 1881 revealed a high birth and death rate, signifying low survival rates. With inadequate public health facilities, life expectancy was low and infant mortality rates were high.


Occupational Structure: An Unbalanced Economy

At the time of Independence, the occupational structure revealed an economy heavily reliant on agriculture. Manufacturing and service sectors were underdeveloped, contributing to an unbalanced economic growth across states.


Infrastructure: Development for British Interests


While the British did invest in some infrastructure, including the introduction of railways in 1850, these developments primarily served colonial interests rather than benefiting the Indian population.


By understanding the impact of British rule on various sectors of the Indian economy, we can appreciate the challenges and opportunities that India faced post-independence.


Detailed Notes


Prior to British colonization, India boasted a robust and self-sustaining economy. Agriculture served as the backbone, providing livelihoods for the majority of the population. Moreover, India was renowned for its diverse manufacturing sectors, including handicrafts, textiles, metals, and precious stone works. Indian exports, particularly the world-famous 'Daccai Muslin' cloth from Dhaka, Bangladesh, were highly sought after due to their exceptional quality and craftsmanship.


  • The economy was primarily agricultural, serving as the main source of livelihood.

  • India was also rich in various manufacturing activities like handicrafts, textiles, and metalwork.

  • Indian products were well-regarded globally, especially for their quality and craftsmanship. For instance, muslin cloth from Dhaka (now in Bangladesh) was renowned worldwide.

Trivia

  • Did you know? Muslin, particularly from Dhaka, was so sought-after that it even found mention in the writings of ancient Roman authors like Pliny the Elder. It was called 'Dacca Muslin' or 'Malmal'







Critical Thinking Questions

  • How do you think Indian society was structured around an agricultural economy?

  • Why do you think the pre-colonial Indian economy was focused on both agriculture and handicrafts? What benefits did this bring?

Suggested Activities

  • Create a Timeline: Create a timeline of famous Indian exports and how they gained fame around the world.



2. British Rule In India: For Own Interests


The Britishers had ruled India for 200 years and reduced India to being a raw material supplier for Great Britain’s industrialization and development. The economic policies followed by the colonial government in India were concerned more with the protection and promotion of the economic interests of their home country than with the development of the Indian economy.


Colonial Interests Over Indian Development

  • British rule significantly altered India's economic landscape.

  • The colonial powers were more interested in serving their own economic interests, rather than developing the Indian economy.

  • India’s importance to the British Empire was such that it was considered the “pivot” of the empire.


India’s importance to British Empire :


India is the pivot of our Empire... If the Empire loses any other part of its Dominion we can survive, but if we lose India, the sun of our Empire will have set.


The British Policies bought fundamental and structural changes to Indian economy transforming Indian from an exporter of quality finished products to supplier of raw materials.


After gaining independence, India faced a fragile economic situation. In response, the Indian government established the Planning Commission and initiated five-year plans to guide the nation's development.


Trivia

  • Did you know? Dadabhai Naroji, William Digby, and R.C. Desai estimated that during the British rule, India’s aggregate output was less than 2%, coupled with a less than 0.5% capital output.

Interdisciplinary Connection : History and Economics

  • Research how the Indian independence movement was also fueled by economic exploitation. Compare this with other independence movements globally like the American Revolution.

Critical Thinking Questions

  • In what ways did the colonial economic policies hinder India's self-sufficiency?

  • Why was India considered the “pivot” of the British Empire?

Suggested Activities

  • Role Play: Conduct a mock parliament session debating the impacts of British economic policies on India.

Tool Recommendations

  • Google Earth: Use it to trace the routes of raw material export from India to Britain.


3. Agricultural Sector Under British Rule

Around 85% of India's population relied on agriculture for their livelihood. Despite an increase in agricultural area, productivity stagnated. Various factors contributed to low productivity and stagnation, including unfair land settlement systems like Zamindari, low technological adoption, and minimal use of fertilizers.


  • Remained fundamentally agrarian - about 85% of India’s population was dependent on agriculture of their livelihood.

  • Continued to experience stagnation and deterioration.

  • The sector grew in absolute terms due to increase in agricultural area but the productivity remained low.

  • The yield of cash crops increased due to commercialization of agriculture but it could not improve the situation of farmers very much as the were being used by Britishers and resulted in lower margins.




Reasons for Low Productivity and Stagnation (Features of Indian Agriculture)


  • Unfair land settlement systems such as Zamindari (In Bengal Presidency - Eastern India) in which the profits from agriculture went to Zamindars.

  • The Zamindars however did not do much to improve the condition of agriculture because the revenue settlement system required them to pay the revenues to Britishers in a given time or risk losing their Zamindari rights.

  • Low level of technology, lack of irrigation facilities and negligible use of fertilizers.

  • Low investment in terracing, flood control, drainage and desalination of soil.

  • No Incentive - Farmers did not have the resources nor the incentive to invest in agriculture.

  • High Dependence on Monsoon


4. Industrial Sector Under British Rule


The primary motive of the colonial government behind this policy of systematically de-industrialising India was two-fold.


  • Reduce India to only an exporter of raw material for modern British industries.

  • Turn India into a market for finished British goods.


As a result, India could not develop sound industrial base even as its handicraft industry declined.


The decline of handicraft industry led to massive unemployment.


It also created a new demand for British goods as Indian market was now deprived of local goods manufactured in India.

  1. Modern Industry took root in India but its progress was slow.

  2. The development was initially confined to textile industries of cotton and jute.

  3. Cotton mills were dominant in Maharashtra and Gujarat and Jute mills in Bengal.

  4. Slowly steel industry also began to develop.

The steel industry also saw its inception, with The Tata Iron and Steel Company (TISCO) being established in 1907.


  • There were hardly any Capital Goods Industry, therefore the industrialization was slow.

  • The contribution of Industrial Sector in GDP remained very small.

  • Development remained confined only to the railways, power generation, communications, ports and some other departmental undertakings.


5. Foreign Trade Under British Rule


  • Restrictive trade and production policies of British government adversely affected the structure, composition and volume of India’s foreign trade.

  • Britain maintained a monopoly control over India’s exports and as a result more than half of India’s trade was restricted to Britain. The opening of Suez Canal further strengthen the British control on Indian trade.

  • India became an exporter of primary products (raw materials) and importer of finished consumer and light capital goods.

  • There was large export surplus but it came at a huge cost to India.

  • Essential commodities were scarce in domestic market.

  • The export surplus did not result in inflow of Gold/Silver in India. This was used to finance the war and pay war loans of Britishers, thereby draining India of its wealth.


6. Demographic Condition Under British Rule


  • First Census took place in 1881. Conducted every 10 years.

    • Revealed unevenness in India’s growth

    • India was in first stage of Demographic Transition - 1881 - 1921

  • High birth and High death rate implied low survival rate, which was nearly 8 per thousand per annum.

  • Public health facilities were unavailable for most population. Water and Air-borne diseases were rampant.

  • Life expectancy was low - 44 years compared to 68 years today, which shows the lack of health care facilities, lack of awareness as well as lack of means for health care.

  • Infant Mortality rate was very high at 218/1000 compared to less than 40 today.

  • Literacy rate was low - 16 %, which reflects the social and economic backwardness of the country with female literacy as low as 7%.









7. Occupational Structure Under British Rule


  • Distribution of working persons across different industries and sectors, showed little sign of change.

  • Agriculture was the principal source of occupation and about 70-75% of working population was engaged in agriculture.

  • Only around 10% of the working population were engaged in the manufacturing sector, which showed the backwardness of Indian Industry at the time of Independence.

  • Only 15-20% of the working population were engaged in the service sector, which also proved the slow growth of tertiary sector.

  • There was an unbalanced growth of Indian economy at the time of Independence with some states like Tamil Nadu, Andhra, Karnataka, Bombay and Bengal showed increase in manufacturing and service sector while areas of Punjab, Rajasthan and Odisha showed increased dependence on agricultural activities.


8. Infrastructure Under British Rule


There was some infrastructural development during the British in the area of transport and communication but the motive of development was to serve the British interests.

  • Roads that were constructed were not all weather roads and were unfit for transposition and the ones which were built were used to mobilize the army and draw out raw materials for export from rural areas to ports.

  • Introduction of Railways in 1850 is considered a very important contribution of britishers in India. It had the following impact:

    • Enabled people to take long distance travel allowing them to break physical barriers

    • Fostered commercialization of Indian agriculture, which adversely affected self sufficiency of farmers in rural India as most crop was grown for commercial purposes with very little left for their sustenance.

    • India’s exports expanded but its benefits didn’t benefit the Indian economy.

    • The social benefits were outweighed by country’s economic loss.


  • Britishers took measures for development of inland trade and sea lanes. However these efforts were not satisfactory.

  • Many projects like the Coast Canal on Odisha Coast cost the government a lot but they could not compete with railways and ultimately had to be abandoned.

  • The telegraph system helped in maintenance of law and order.

  • The postal system though beneficial for public was inadequate.


Questions for Review

  • How did the British rule impact different sectors of the Indian economy?

  • What were the key features of India’s economic landscape before the British rule?

  • How did India manage its economy post-independence?


 


Summary


The British rule had a profound impact on India’s economic landscape, transforming it from a self-sufficient economy to a colonial satellite. However, post-independence India has made strides to rebuild its economy, though the colonial impacts still reverberate.


Further Reading

  • "Poverty and Un-British Rule in India" by Dadabhai Naroji

  • "An Era of Darkness: The British Empire in India" by Shashi Tharoor


Teaching Resources


  1. Role-Playing Activity: Divide students into groups representing various sections of society (peasants, artisans, British officials, Indian landlords). Let each group express their grievances or defend their actions during the colonial era.

  2. Comparative Analysis: Compare the state of the Indian economy during the colonial period with another colonized nation. What similarities and differences can be observed?

  3. Data Analysis: Compare pre-colonial, colonial, and post-independence economic indicators using tools like Excel or Google Sheets.

  4. Debate: "British rule was a blessing for India's infrastructure development." Students can debate for or against this statement, using historical evidence.

  5. Documentary Viewing: Show a documentary on India's colonial era, followed by a discussion session.

  6. Critical Thinking Questions:

    • How did the British economic policies prioritize their interests over those of Indians?

    • Why did traditional Indian industries decline during the colonial period?

    • How did the socio-economic disparities of colonial India lay the foundation for challenges in independent India?

    • How did post-independence economic policies aim to redress the economic mismanagement of the colonial period?


In understanding the Indian economy on the eve of independence, it's clear that while there were some areas of development, they largely served British interests. The challenge for independent India was to reverse the damages of colonial rule and chart a new path of inclusive and sustainable growth.


Tool Recommendations

  • World Bank Data: Access real-time data to analyze how the Indian economy has changed over time post-independence.

  • Geogebra: Learn about the ancient agricultural techniques and how they could be mathematically efficient.


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